UPSC Previous Year Question | Prelims GS | 2024

With reference to the rule/rules imposed by the Reserve Bank of India while treating foreign banks, consider the following statements: 1. There is no minimum capital requirement for wholly owned banking subsidiaries in India. 2. For wholly owned banking subsidiaries in India, at least 50% of the board members should be Indian nationals. Which of the statements given above is/are correct?

  1. 1 only
  2. 2 only
  3. Both 1 and 2
  4. Neither 1 nor 2

Answer

Correct Answer

2 only

Explanation

Statement 1 is incorrect because RBI's framework prescribes a minimum capital requirement for a wholly owned subsidiary of a foreign bank in India; it is not exempt from minimum capital norms. Statement 2 is correct: RBI's guidelines require at least 50% of the directors of such a subsidiary to be Indian nationals, subject to the applicable regulatory provisions. Therefore, only statement 2 is correct.

Topics: banking regulation, foreign banks in india, indian economy, wholly owned subsidiaries and rbi rules